Trump’s sons have little to celebrate in Mississippi

|    Jonathan O’Connell    |

SHORTLY after United States (US) President Donald Trump entered the White House, his eldest sons announced ambitious plans to open a line of hotels called Scion that would target young, hip customers mostly in places where their father had proved popular with voters.

The first Scion would open in the Mississippi Delta in early 2018. A second line of hotels, called American Idea, would soon follow, with three in Mississippi and more than a dozen elsewhere. In all, the Trump Organization said it had preliminary agreements to open 39 properties.

This was the brothers’ primary and boldest idea for expanding the family business – a push into markets that it had long overlooked, they said.

A year and a half later, progress has been slow. The first Scion, in Cleveland, Mississippi, remains nearly a year from completion. The first two American Idea hotels, in the same area, will not open until later this year.

And no projects outside of Mississippi have publicly materialised, giving Donald Trump Jr and Eric Trump little to celebrate following a two-year stretch overseeing their father’s business. During that time, the company became the target of federal court cases and lost deals in some markets after partners complained about the brand.

Mississippi businessman Dinesh Chawla and his brother Suresh, owners of 18 hotels in the Gulf Coast region, announced their deal with the Trumps in a glitzy reception at Trump Tower in June 2017. The Chawlas would develop and own the Scion; the Trumps would brand and manage it.

“Eric and I got a great crash course in America over the last two years,” Donald Trump Jr said to the crowd of about 500 at the reception. “We saw so many places and so many towns and heard so many stories that were so touching. People that were so excited about the prospect of this country and Americana in general.”

The plans for Mississippi remain. But Dinesh Chawla says that, at the direction of Trump Organization executives, he has spent hundreds of thousands of dollars and the better part of a year reworking the Scion so it will be capable of attracting meetings, concerts and festivals to Cleveland.

Eventually the 100-room hotel, half-completed on a 17-acre site, will be surrounded by 10 other buildings for restaurants and event space in a complex costing more than USD20 million. Chawla estimated he would spend USD5 million more than he originally planned.

“They looked at all our plans, and they liked the basic layout of the hotel, but they did not find our meeting space functional,” Chawla said. “They worked with us around how it could be restructured.”

CEO of Chawla Hotels Dinesh Chawla
Construction in Cleveland, Mississippi, of The Scion, a new brand of upscale but smaller hotels is behind schedule after design changes and other issues. Scion at West End was to be managed by Trump Hotels, in a partnership with Chawla Pointe, a Mississippi company. – PHOTOS: WP-BLOOM
This Comfort Inn hotel in Cleveland, Mississippi, is slated to be part of the America Idea chain

Chawla, whose father grew up in a refugee camp in India before emigrating to Canada and then the US, said he is pleased with the changes because, to succeed, the project needs to become a destination for tourists and business meetings. The starting room rates for Scion hotels are expected to run USD200 to USD300 a night.

Many locals may not be able to afford to stay there, as 59 per cent of households in surrounding Bolivar County make less than USD35,000 a year. While the area attracts tourists in search of blues music, three other hotels are in the works in Cleveland, even though the town – surrounded by soybean and cotton fields – is home to just 15,800 people.

“We need to grow the pie,” Chawla said. “If we just capture the current Cleveland visitors’ market, we’d be going into bankruptcy.”

Local tourism officials are bullish on the property, located less than a mile from the Grammy Museum that opened in 2016 and Delta State University.

“I think it’ll draw people in, having a nice hotel. We’ve seen over the last three or four years a boost to tourism with the Grammy Museum,” said Executive Director of the Cleveland-Bolivar County Chamber of Commerce Judson Thigpen.

When the Trumps announced their deal with the Chawlas, Chief Executive of Trump Hotels, Eric Danziger said he had agreed to 39 letters of intent – informal preliminary agreements – for other hotels across the country.

Outside of Mississippi, those plans have made no discernible progress. The Trump Organization declined to comment on how many hotels are in the works but issued a statement from Danziger saying the Trump Organization has “enjoyed the process of working with the Chawlas and have great respect for them”.

“We are always exploring opportunities for growth and continue to work a robust pipeline of opportunities as we build out our brands’ expansion,” Danziger said.

Since Trump left the business, the Trump Organization has followed through on projects that were underway in Vancouver, Dubai and India – sometimes over the objections of government ethics experts – but it lost branding and management deals for hotels in Toronto, Panama and New York. Owners of apartment and condominium complexes in New York have taken the Trump name down there as well, saying the brand was hurting their property values.

Investigators are also swarming the company, and that is putting it at risk of having to disclose private financial information in court cases and before Congress now that Democrats have taken over the House of Representatives, according to congressional staff.

Two of the Chawlas’ other hotels, a Comfort Inn in Clarksdale and a Rodeway Inn in Greenville, are on pace to open in the spring or summer as the country’s first American Idea hotels. Chawla said he was not sure whether another property he owns in Cleveland, initially pegged as another American Idea, will convert or not.

Experts said there is some legal risk to the Trumps in the expansion. In two lawsuits wending their way through federal courts, plaintiffs argue Trump – because he still owns his business – is violating the Constitution’s emoluments clause, barring gifts or payments from foreign or state governments.

The Mississippi plans have not become a focus of either case, but Mississippi’s department of tourism approved up to USD6 million in tax rebates for the project on top of already approved local subsidies, and the Chawlas have talked about partnering with Delta State University, a state-run school.

John Mikhail, a Georgetown University law professor, said such support could run afoul of the domestic emoluments clause, which bars states from providing benefits to the president, but that it was difficult to tell because there is no existing case law.

“It could go either way,” he said. “If the domestic emoluments clause is interpreted the way some of these plaintiffs would like it to be, then it could be a problem.”

Trump, backed by Justice Department attorneys, has argued in court that any payments his hotels receive are market-rate transactions that do not qualify as emoluments and that the cases ought to be dismissed.

Chawla has done his own research on the emoluments clause and said the state programs he is using are available to other developers and are not the result of any political favouritism. “That’s for someone else to decide,” he said. – WP-BLOOM